In his Under-Capitalized Sectors model, manager John Mooney looks for sectors that are currently out of favor with investors and have relatively low price to earnings ratios. Recently, he added H&R Block Inc (NYSE: HRB) to the model. HRB has a low price to earnings ratio compared to competitors and when its stock price hit $10.13 during the October 20th, 2010 trading day, HRB was at a 52-week low. This drop in price occurred after the company announced that Standard & Poors could be lowering the company’s credit rating due to the risk that HRB may not be able to offer its tax clients loans in anticipation of their refunds during tax season.
Another position added to the model was ProShares UltraShort S&P 500 ETF (SDS). SDS attempts to perform similar to 200 percent of the inverse of the S&P 500. The majority of the fund’s holdings (as of November 2nd, 2010) consist of S&P 500 Swaps. On the same day, the fund was trading at a premium to NAV.
The Small Cap Growth model invests in growth companies whose business models show sustainability and that have strong management with reliable cash flows. Recently, they added Hypercom Corp (NYSE: HYC) to the model. HYC delivers global payment technology solutions to businesses. Their technology opens up a wide range of possibilities for many businesses to expand their markets. The company’s net cash flow from operating activities has been increasing since 2007, when it was $13.8 million. In 2008 it rose to $22.2 million and in 2009 to $30.6 million.
